All Entries in the "BizFinance" Category

Sure, nobody wants to be labeled a Scrooge. But if you’re among the roughly 50% of U.S. businesses (and shrinking) that still offer traditional yearend bonuses, it might be time to join the 21st century – and plan for something different in 2013.

Too many small business bonus plans operate on autopilot, under “conventional wisdom” that offering yearend bonuses works. But these ritualized holiday handouts can actually undermine your mission, strategy and goals.

“As an employee incentive strategy, the traditional yearend bonus is better suited to the 19th century world of Charles Dickens’ A Christmas Carol than today’s workplace,” says employee recognition expert Michael Levy, CEO of Online Rewards, who’s created incentive programs for a wide range of large and small companies.

In fact, the yearend bonus or gift has already been fading for some time, according to surveys conducted by the human resources firm Challenger, Gray & Christmas. Five years ago, nearly three-fourths of companies surveyed said they offered yearend awards – a figure that’s plunged to just half, and appears headed lower.

More and more businesses are discovering that “automatic” bonuses do little to reward and retain high performers, nor do they help much with morale or loyalty. Yearend rewards are often too far removed from actual positive actions that occur throughout the year to be meaningful. Business owners who drop yearend bonuses are shifting instead to year-round efforts that have proven more effective.

Unless you’re a Wall Street firm (where plump yearend payouts remain a staple of the trade), reviewing your strategy could be a good idea.

Here, BizBest offers four reasons to ban the yearend bounty and look for new ways of getting more bang for your bonus buck:

1. Yearend bonuses have little impact on performance.

Traditional yearend bonuses as applied at most small businesses simply don’t have a significant impact on employee behavior. For the most part, they are symbolic rather than strategic. Even if you’ve “always done it,” bite the bullet and ban the bonus. Today’s employees react more positively to the instant gratification of receiving real-time rewards throughout the year, rather than waiting 12 months for a bonus envelope.

2. Payouts or gifts should be based on performance, not entitlement or tradition.

Some of America’s most innovative small companies are realigning holiday bonus budgets to put them more in step with individual performance, as well as overall business goals and results. Instead of offering yearly lump sum payouts, these businesses are creating continuous reward and recognition strategies that recognize outstanding performance when it happens. These timely rewards are better able to target employees based on individual performance.

3. Year round programs are better at strengthening relationships between employees and business owners or managers.

By offering smaller but more frequent rewards throughout the year, you’ll regularly promote behavior that advances your overall business goals and creates a more lasting positive perception among employees – and customers, too.

4. A “meaningful” bonus might be much less than you think.

Numerous studies show that most employees merely want to be recognized for their ongoing contribution to the business. This doesn’t require a Wall Street-sized check. “Many workers are happy with a $25 gift certificate to a local store or restaurant,” says John Challenger, CEO of Challenger, Gray. “Others would be happy with an extra day or two of paid vacation at the end of the year.” Electronic devices, gift cards, travel vouchers and movie passes often serve as better rewards than cash because they are indulgences the employee might not otherwise experience. Cash often goes toward basic expenses (credit card debt, for example), and is less memorable.

Not about being cheap

This isn’t about cutting costs or being cheap. But done right, your investment in bonuses and rewards throughout the year will improve results and help achieve your business goals.

Instead of the stale yearend approach, consider a variety of employee reward and recognition programs, sales incentive solutions and even customer loyalty programs tied to employee performance. Your goal should be to create engaging and purposeful incentive solutions, not simply a bonus plan that people starting thinking about when the weather turns colder.

This is about financial statements. I’m sorry, but stay with me. Sure, social media would be a far sexier subject. But hey, if you ever file a tax return (and you’d better), need bank financing, angel investors, venture capital or a loan from friends and family, these are things you must know.

The fact is, most business owners and startup entrepreneurs never had a formal course in business finance. With that in mind, here’s a “cheat sheet” to help you understand the three basic financial statement flavors: 1) Balance sheets; 2) Income statements, and; 3) Cash flow statements.

Your balance sheet

This shows what your business owns and what it owesat a fixed point in time, and provides details about your assets, liabilities and owners’ equity. It does not show money that flows in and out of the accounts during that period (we’ll get to that shortly).

Assets are things your business owns that have value and could be sold, including tangible assets such as vehicles, equipment, inventory and cash, plus intellectual assets such as trademarks and patents.

Liabilities are amounts your business owes to others, including loans, rent, vendor accounts, payroll and taxes, as well as obligations to provide goods or services to customers in the future.

Owners’ (or shareholders’) equity is your capital or net worth. It’s the amount that would be left if the business sold all assets and paid off all liabilities. This leftover money belongs to the owners.

Your income statement

This shows revenues over a specific time period – i.e. a month, quarter or year – and what you spent to generate that revenue. The literal “bottom line” of an income statement shows what the business earned or lost over that period.

Think of an income statement as a stairway. You start at the top with total sales, and then go down one step at a time. At each step, you make a deduction for costs or other operating expenses that were necessary to earn the revenue. At the bottom of the stairs, after deducting all of the expenses, you learn how much the business earned or lost.

Your Cash flow statement

This shows inflows and outflows of cash over a fixed period. It’s critical because any business needs cash to cover ongoing costs. While an income statement (above) shows profit or loss, a cash flow statement merely indicates if the business generated cash. You should also know that a cash flow statement shows changes over time, not absolute dollar amounts at a given point. The bottom line of the cash flow statement shows how much it went up or down for the period. Generally, cash flow statements review the cash flow from three key activities: operating, investing (back into the business) and financing.

Key Terms and Ratios to Know

Here’s a mini glossary of four key financial statement terms and ratios you’ll also want to know:

TheDebt-to-equity ratio compares total debt to owners’ equity. Both numbers come from your balance sheet. To calculate a debt-to-equity ratio, divide total liabilities by owners’ equity. If a business has a debt-to-equity ratio of 2-to-1, for example, it means that it is taking on debt at twice the rate that its owners are investing in the company.

Inventory turnover ratio compares a company’s cost of sales on its income statement with its average inventory balance for the period. To calculate this ratio, divide cost of sales by average inventory for the period. A 2-to-1 ratio means the company’s inventory turned over twice in the reporting period.

Operating margin shows percentage of profit for each dollar of sales. It compares operating income to net revenues. Both numbers come from the income statement. To calculate operating margin, divide income from operations (before interest and income tax expenses) by net revenues. Operating margin is usually expressed as a percentage.

Working capital is the money leftover if the business paid its current liabilities (debts due within one-year) out of its current assets.

What does your growth-minded small business have in common with Apple? Not much, perhaps, but here’s one thing: The multi-gazillion dollar tech company got early funding from a unique type of investment firm called a Small Business Investment Company – and so could you.

SBICs are high-powered but low-profile backers of small businesses, pumping over $4 billion into small, growing firms, as well as some early-stage startups in the past year alone. They’ve been around for 54 years (surprise!) but most capital-seeking small businesses and startup entrepreneurs have never heard of them. So what gives?

Flying Below the Radar

For one thing, SBICs deliberately fly below the radar to avoid being inundated with funding requests. But SBICs are still on the lookout for high potential small businesses to invest in, and the amount of money available to small companies via this channel has skyrocketed 85 percent in the last two years, setting all-time records. Not only is this an increasingly important funding source, it’s also an innovative, time-tested structure that marries some of the best features of private equity money with government guarantees.

SBICs are a unique kind of funding source. They are privately-owned and managed investment firms that are like a combination of a bank, venture capital firm and angel investor. Unlike VCs, however, SBICs see themselves as longer-term investors, and often portray themselves as the “patient money” alternative to venture firms seeking a quick exit.

Licensed by the SBA

In part, that’s because of how they’re structured. For one thing, SBICs are licensed and regulated by the U.S. Small Business Administration (SBA). And the money they invest in small businesses – through equity investments, loans or both – comes from purely private sources plus capital raised with the help of SBA guarantees. Today there are 301 operating SBICs, with a total of $18 billion in capital under management. That’s not chicken feed.

The SBA backing has helped entice record levels of private capital to SBICs, and into small businesses – about $1 billion in the past 12 months. SBICs invest in a wide range of small business types, including established firms with less than $1 million in revenues, as well as early-stage companies just underway. Because the SBA licenses them, SBICs must invest exclusively in small firms, with at least 25 percent of investments directed to businesses with under $2 million in after-tax income. Investments must be debt, equity or a combination of the two.

Some SBICs Specialize and Some Don’t

Some SBICs specialize in certain industries, while others invest more generally. Keep in mind, however, that this isn’t typically seed capital for launching a business from scratch. Most SBICs look for small but growing firms that are at least mature enough to make current interest payments on any debt.

A few SBICs are also linked into the White House Startup America Partnership program (www.s.co) that’s been marshaling public and private resources to support startups for the past several years. (The author’s firm, BizBest (www.BizBest.com), is a Startup America member and featured startup resource.)

How to Find SBICs and Request Funding

There’s a state-by-state directory of licensed SBICs on the SBA website at this address: http://www.sba.gov/content/sbic-directory. Or visit the main SBIC page at www.SBA.gov/INV and look for the “Small Business Owners & Entrepreneurs” section for more information and resources. That’s where you’ll find step-by-step guidance on seeking SBIC financing for your small business.

Research and identify SBICs that might be a good fit for your business. Check the directory listed above, as well as the Small Business Investor Alliance (www.sbia.org) and National Association of Investment Companies (www.naicvc.com) websites.

The SBIC Directory offers a wealth of information on each SBIC, including its preferred investment size, type (i.e. loans, equity, debt with equity, etc.) and stage (early, expansion, later, etc.). The directory also provides details on industry and geographic preferences of individual SBICs.

Once you’ve identified target firms, take steps to present them your business plan. But don’t go in cold. Since they receive hundreds of plans yearly, you will benefit greatly from a personal reference or introduction to the particular SBIC fund manager being targeted. Check the firm’s website for names, or search LinkedIn to see if you have any mutual connections you might leverage. Or talk to accountants, attorneys, executives in your industry and other colleagues to try and arrange an introduction. Time spent will be well worth it.

If you’ve had trouble getting a small business loan or other types of bank credit or financing for your business or startup, here’s something that might work: Apply for an unsecured small business line of credit.

Start small – basically with whatever size line a lender is willing to provide. The important thing is to get a foot into the bank financing door. Even if the credit line is small, put it to immediate use and pay it off diligently and always on time.

Once you’ve established a track record, you can seek to expand the credit line in small steps. Many major banks that serve small business offer unsecured business credit lines of $5,000 to $100,000 for firms that have been around at least 2 years.

These include well known commercial banks such as Bank of America, Wells Fargo, US Bank, Chase and Key Bank, as well as community banks, credit unions, online banks and some you might not have thought of such as American Express Bank, Capital One Bank, Discover Bank and Advanta Bank.

A Flexible Financial Tool

A business credit line is a flexible financial tool that can help you grow if you use it right. And even if you don’t have an immediate need for credit, it’s handy to have in your hip pocket if business conditions change. Establishing the revolving credit line is cheap, you only pay interest on what you borrow and you can use the line for almost anything.

Six things a credit line can be used for:

Remodel, expand or upgrade your store, offices or other facilities.

Buy new computers, servers, office technology or other equipment.

Purchase extra inventory for upcoming promotions or seasonal spikes.

Launch a new online marketing campaign.

Create a new product prototype, pursue a promising business opportunity.

Cover unexpected expenses.

Banks are still a good place to look for credit lines. Sure, bankers are being more tight-fisted these days, but they do have money to lend – especially for established businesses – and credit lines are one way they are doing it. Wells Fargo, for example, offers small business credit lines up to $100,000 that you can apply for online, even if you’re not a current customer.

Credit lines are also appealing because of their low costs. Interest rates will vary with prevailing market rates, but many lenders allow you to tap the line – via paper check, online, check card or other method – for no fee. However, you can expect to pay a modest fee to open the account once you’ve been approved. Wells Fargo, for example, charges $150 for lines under $25,000 and $250 for larger lines. Any annual fee is often waived for the first year, and may run $100-$150 annually thereafter.

Ask about interest rate protection

You should also ask if the lender offers some kind of interest rate protection or lock-in feature to protect you against rising rates in the future. Some lenders will let you lock in an interest rate on your business line of credit for a year.

Beware of using a credit line for cash advances however, as many banks charge a cash advance fee that can run 3% or more (on top of any interest you’d pay).

How to apply for a Business line of Credit

To obtain a credit line, you will probably need to supply some financial information about your business as well as yourself, so be prepared with income and other statements or tax returns.

Sources of small business credit lines are numerous. To find the perfect fit and absolute best terms, you should plan to comparison shop among several lenders.

Some banks also offer unsecured revolving lines of credit backed by the U.S. Small Business Administration (SBA). The SBA’s CAPLines program helps business owners meet short-term and working capital needs and can be a great option for newer businesses less than four years old.

Different types of CAPLines

Seasonal Line. Loan proceeds can only be used to finance seasonal increases of accounts receivable and inventory (or in some cases associated increased labor costs), but can be revolving or non-revolving.

Contract Line. This line finances the direct labor and material cost associated with performing an assignable contract and can be revolving or non-revolving.

Builders Line. If you are a small general contractor or builder constructing or renovating commercial or residential buildings, this can finance direct labor and material costs. The building project serves as the collateral and loans can be revolving or non-revolving.

Standard Asset-Based Line. This is an asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. It provides financing for cyclical growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is used to pay back the lender. Your business can continually draw from this line of credit, based on existing assets. This line is generally used by businesses that provide credit to other businesses.

Small Asset-Based Line. This is an asset-based revolving line of credit of up to $200,000. It operates like a standard asset-based line except that some of the stricter servicing requirements are waived, as long as your business can show repayment ability from cash flow for the full amount.

4 Credit Line Tips and Warnings

Avoid carrying a constant balance on your credit line. Periodically paying down the debt completely will keep the credit in place and your lender happy.

One key factor in obtaining a credit line will be your business cash flow.

If your business doesn’t quality for a standard credit line, ask for an “asset-based” line.

Remember, the best time to set up a business line of credit is before your business actually needs it.

Understanding the value a customer has to your business over time is critical to making smart, cost-effective marketing decisions. Getting this right can light up your bank account. It will help you know:

What market segments to target first

How much you should be willing to spend to acquire a customer

What types of customers you DON’T want to spend money on

How much you should spend to retain EXISTING customers

Which types of current customers you may want to “fire”

Your magic bullet is something called “customer lifetime value” (CLV), or just lifetime value (LTV). CLV is a business school concept that actually has real-life, make-or-break implications for small firms. Basically, CLV defines – in dollars – today’s value of the future profits your business can expect from a customer over the entire time they remain your customer. That time could be a day — or a decade. It’s important stuff; especially for small businesses that have been lured into the daily deals game and may be sacrificing long-term relationships for a few quick bucks.

CLV does take some effort. But it needn’t be hard. (Below, I’ll tell you about a handy online CLV calculator you can use for free.)

In simplified form, here’s how you get to it:

Pick a time frame; say 10 years.

Take the total annual revenue you expect from a customer – including expected changes up or down each year – and add them up.

Subtract your expected costs of attracting the customer in the first place, your cost of goods sold, and the costs of servicing the customer each year.

Apply a “discount rate” (usually 10-20%) to recognize that a dollar you hold in your hand today is worth more than one you get in the future.

One thing you’ll quickly discover is that common sense is correct: The longer you keep a customer, the more profit they produce. That’s true most of the time. Trouble is, not all customers are the same.

Oops! They cost different amounts to acquire. They produce different amounts of revenue and stay with you different lengths of time. They also require different amounts of care and feeding. If you don’t account for these differences, you’ll end up paying to acquire and keep unprofitable customers.

Bottom line: Segment your markets and spend more to acquire and keep your best customers. Think of it this way: Does it make sense to spend, say, $40 to attract a new customer (with a Groupon offer, for example) while spending nothing to keep a customer you already have?

Many business owners know a version of this as the 80/20 rule: That 80% of the profits come from 20% of the customers. Yet, conventional wisdom tells businesses to treat all customers alike. That’s a problem because all customers are not created equal. Being CLV savvy helps you focus your marketing methods and spending on customers who bring real value to your business.

Here are three more reasons to use CLV:

1) Your marketing budget is limited. It makes sense to deploy limited resources where they count the most – with customers who represent the highest profit to your business over time.

2) Even small percentage changes in customer retention produce large increases in profit. “Customer equity” in a business – which is the sum of all customer CLVs – jumps 50% with just a 10% increase in retention. Repeat sales are what send profits soaring!

3) Knowing CLV helps you see things in new ways. For example, while yellow pages may be out of favor, it might be that customers who find you there have higher CLVs than those who click a Google ad. Knowing this would help inform your marketing decisions.

Technology shapes how small businesses survive and thrive, and 2012 will see record numbers of small businesses harness the power of technology and especially new online productivity tools to grow their businesses. Jerry Nettuno, founder and CEO of Schedulicity, which is one of those online tools, shares his small business predictions for 2012:

1. Daily deals dive: The daily deal space exploded last year, but 2012 will see deal shrinkage of 30% or more. Rapid contraction will leave just a couple of “big guys,” some vertically positioned players and a long tail of locals finding ways to thrive by serving a few small regions or cities.

2. Surviving deals get a makeover: Burned by go-for-broke deals, many local businesses will fine tune and target their offers to strengthen loyalty. The more geographically concentrated your customer-base is, the better your chances of turning deal-seekers into repeat buyers. Look for an increase in frequent buyer and perk programs to support this movement in 2012.

3. Small businesses move to the cloud. The ability to self-publish quickly via the cloud is moving businesses out of traditional media. Productivity services such as Google Docs, Zoho Creator, Office 365 (from Microsoft) and many others are making it easier than ever to operate entirely online. Low cost tablet computers will let more service professionals and small business owners run their businesses from a mobile device.

4. Breakthrough tools arrive. Emerging technology will spawn more break-through productivity tools. Business owners will see new, off-the-shelf ways to connect with consumers. With the launch of Siri, Apple’s new voice-activated personal assistant application, developers will be hard at work on amazing voice-activated apps that will offer a unique way for local businesses to stand out.

5. The “Digital Coupon Book” takes off: The move to more online shopping turns passive discount recipients into active coupon seekers. Digital “coupon books” will dominate within the next two years, offering small businesses another way to leverage existing customer relationships with hyper-local offers. We’ll see a growth in local offer networks, personalized consumer dashboards and highly targeted deals.

6. The appointment book disappears. The success of sites such as Schedulicity, OpenTable and ZocDoc reinforce the idea that the traditional pen and paper appointment book may soon disappear. The number of appointments booked online is soaring. Schedulicity alone has seen nearly 7 million appointments booked online since mid-2009.

7. Mobile commerce soars. Mobile payment, location-based promotions, and mobile scheduling will all change the way small business owners conduct business in 2012. Whether iPad or iPhone, Kindle Fire or Droid, the move to mobile will continue apace. Making your business website mobile-friendly is only a start. As more and more consumers are making mobile a mainstay, it will be essential for small businesses to have a mobile commerce strategy to tap into this opportunity.

8. Thinking “local” gains steam. With a still-shaky economy and unbending unemployment rates, 2012 is poised to be trying for small business. Small business owners need to think local – the headlines in the local newspaper and the vibe on Main Street are more important than what’s being talked about on CNBC.

9. Social media gets marketing money. Social media marketing isn’t just for early adopters anymore. Big brands and Fortune 500 companies have spent the past three years discovering (and utilizing) the marketing capabilities of Facebook, Twitter, and other online tools. In 2012, more small businesses will expand online and embrace Facebook as the dominant social media marketing tool for local business.

10. The client continues to be king. Small business and independent service professionals are no longer “too busy for new clients.” Taking advantage of networking opportunities and exploring new online listing options will help small businesses make themselves known and available to new clients.

“Back office” and other types of financial fraud are rising at U.S. companies, and are hitting small businesses especially hard. Fraud experts point to the lingering effects of recession, cutbacks that have eliminated financial checks and balances at many businesses, and simple complacency as key reasons.

According to Joseph Wells, a CPA and founder of the Association of Certified Fraud Examiners, these three major risk factors can lead to fraud in a small business:

1) Inadequate screening of employees before they are hired. Doing background checks is advised.

2) Inadequate financial controls around record-keeping, bank accounts and how cash is handled.

3) Too much trust. Sadly, the very thing that makes a small business a nice place to work also helps thieves succeed.

Some common back office fraud schemes include billing for non-existent goods or services, creating fake vendors, writing checks to dummy businesses or taking kickbacks from vendors.

A recent survey of small business owners by TD Bank, one of America’s 10 largest financial institutions, found that 75 percent are taking at least some steps to protect themselves against financial fraud. But most aren’t doing nearly enough.

“It pays to be vigilant,” says Robert Dunlop, who heads corporate security and investigations for TD Bank. “Given the influx of new technologies available to small business owners, it’s important to learn about the latest techniques used by criminals, and to be more diligent in defending against fraud.”

Here are some tips for protecting your business against financial fraud:

Employ financial checks and balances. Perform an internal review of company finances monthly. Make sure payment amounts match all invoices, and check for missing documents. Running random audits or having a third party audit the books yearly shows employees that you are serious about fraud and deters would-be thieves.

Protect computer systems and practice web awareness. Being complacent about cyber protection has cost many small companies dearly. Every computer should have the latest firewalls and anti-virus software. Beware of “phishing” schemes that try to obtain confidential information from you or your employees. These usually take the form of an email that appears to be from a financial institution or service provider, but is fraudulent. While most are easy to spot, some contain enticing headlines or appear to come from a legitimate address.

Guard sensitive hard copy documents, too. The digital realm isn’t the only place your information is at risk. Employees and others can steal your mail, credit card information or checks. Printed financial statements and other sensitive papers should be shredded or stored securely. Most financial institutions now let you opt out of receiving paper statements entirely, so that’s something to consider.

Even innocent photocopiers pose risk. “Most copiers built since 2002 contain a hard drive that stores every image scanned, copied or emailed. When you sell or upgrade your copier, the machine is usually reconditioned, but often the hard drive is left intact,” says Dunlop. Once the machine is resold, anyone can simply pop out the hard drive and access confidential information such as income tax and bank records, social security numbers, and medical records.

Use secure online banking. Online banking is a secure way to manage small business finances. Most major banks now provide numerous levels of online security. Benefits include 24/7 access to real-time information, account transfers and payment management. You can easily schedule and manage payments and will have an audit trail of all transactions. Be sure to check account activity regularly. Having instant access to payment histories helps you monitor spending for any discrepancies.

Get proper insurance. Crime and fraud-related losses generally aren’t covered by property insurance policies, so it’s important to protect money losses from workplace fraud. “Fidelity Insurance” protects your business against criminal acts such as robbery, embezzlement, forgery and credit card fraud. Liabilities secured under this type of insurance usually include money loss coverage (burglary or theft) and employee dishonesty (embezzlement and forgery).

Here are two words small business owners seldom like to see together: “taxes” and “surprise!” Trying to cope with overwhelming complex tax laws is hard enough without the occasional grenade the IRS tosses across the moat. But BizBest figures you’d rather know now, before getting a notice in the mail. Here, then, are tips on four recent or impending tax changes that you’ll want to know about (and one of them is actually good news!):

1) If your employees earn tips, the IRS has you in its sights (again). The tax agency has launched a new effort to bill employers for Social Security (FICA) and Medicare taxes on tip income reported by employees to the IRS, but not to you. The genesis of this is an IRS form you probably never heard of: Form 4137: Social Security and Medicare Tax on Unreported Tip Income. This is how tip-earning employees tell the IRS about tips they earned but did not report to an employer – including any “unallocated” tips shown on their W-2. And the threshold is low: Any employee who received cash and charge tips of $20 or more in calendar month and didn’t report that income to you (the employer) must file a 4137. In past years, the IRS didn’t have an easy way to match that income to an employer. But the form was changed and now requires the employee to include your tax ID number. This, of course, creates a new tax event for you (never mind you didn’t know about it), since you are responsible for paying the employer portion of FICA and Medicare taxes on this income. IRS is collecting the information from the new 4137 forms it receives, and is sending tax bills or letters to employers telling them how much they owe. Employers who pay up quickly – usually with the next scheduled payroll tax deposit – are not charged any penalty or interest.

2) S-Corp business owners who pay themselves extremely low salaries in order to take more profits as lower-taxed dividends are also in the IRS crosshairs these days. Be aware the IRS might argue that your pay is unreasonably low if it doesn’t come close to standards in your business or profession, and will seek back taxes on the income that it says should have been classified as salary.

3) And here’s a reason to question the health insurance tax credit for small business that’s received such great fanfare since passage of health insurance form: If you receive such a credit, it will also count against you by reducing the amount your small business can deduct for health insurance premiums. Be sure to factor this in when calculating the value of the credit toward purchasing health insurance for your employees.

4) And finally the good news: Thanks to 2011 100% bonus depreciation, if your business buys a new heavy (gross vehicle weight over 6,000 pounds) SUV this year, you’ll qualify for a much larger tax break than before. As long as the SUV is used 100 percent for business purposes, your company can write off the entire cost immediately under the bonus depreciation rule now in place. Forget the old $25,000 maximum you may have seen as a lid on the amount of an SUV purchase that can be expensed. That doesn’t apply under 2011 bonus depreciation rules. Both new and used heavy pickup trucks also qualify for full write-off.

Unless you carry gold-encrusted financial credentials, many banks and credit card companies no longer want you as a credit customer. But that’s okay, since many credit-worthy (as well as credit-challenged) customers are turning to online “peer-to-peer” (P2P, or person-to-person) loan sources, and are proving they no longer need a bank.

Web-based P2P lending is booming. Consider it the democratization of the lending industry — average Americans making loans to each other in a controlled marketplace made possible by the evolution of several websites created to facilitate P2P lending.

One such site, Prosper.com, has a membership base of over a million individuals, including both those who lend and those who borrow, and has funded over $230 million in loans. The system works like an auction where credit-worthy borrowers post a loan request or “listing,” and would-be lenders bid for the business. So if you have a good-looking credit history, want to borrow $10,000 and are willing to pay, say, 10 percent interest, you could end up with a loan at a lower rate as lenders compete for your business.

As a borrower, you set the amount of want and the rate you want to pay and wait for lenders to step up. And it works. Much like eBay spawned an army of small e-Bay businesses, P2P sites are attracting small investors who see it as a way to earn a higher return on their money.

P2P sites have created a turnkey structure to facilitate the loan process. In addition to matching peer borrowers with peer lenders, the process provides all of the loan documents and payment systems to make the loan happen.

In addition to criteria commonly used by banks, such as credit scores and histories, Prosper lenders, for example, can consider borrowers’ personal stories, endorsements from friends and group affiliations. Once the auction ends, Prosper takes the bids with the lowest rates and combines them to facilitate the funding of one simple loan to the borrower, and then issues what are called “Notes” to all the winning bidders. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrowers and investors. Prosper members can also trade Notes with other members on the Folio Investing Note Trader platform.

Another leading P2P site is LendingClub.com, which works similarly to Prosper.com. RaiseCapital.com specifically targets small business loans and connecting entrepreneurs to potential investors.

Beware of “me-to” sites that attempt to jump on the P2P bandwagon but might not have the member base or resources to stay in business. A site called Pertuity Direct, for example, came and went quickly as its investors pulled the plug. Because P2P lending sites have to meet state government lending rules (as well as federal SEC requirements), they aren’t operating in all 50 states. Check their web sites for a list of areas they operate.

Without warning, millions of small business owners seeking loans or other credit from banks, vendors, corporations, finance companies and trade creditors will now be subjected to a new automated business credit scoring system that aims to reduce lender risk and eliminate manual reviews of small business loan applications. The new small business credit scoring system was developed by Equifax, a large global credit scoring company that has credit information on over 25 million small businesses.

In a nutshell, the new system takes more small business credit decisions out of human hands and turns them over to computers armed with vast quantities of data never before used for this purpose. The new business risk assessment scores allow banks and other businesses to go well beyond traditional industry reports when deciding whether to approve a small business loan or not.

BizBest inquiries have found that banks and other lenders aren’t satisfied with how small business credit scores are currently compiled and have been quietly working with Equifax to develop a new, automated “early warning” scoring method that uses more data on each small business and new techniques to “predict” future changes of default. Small business lenders themselves, through an industry association they’ve created called the Small Business Financial Exchange, are supplying new types of data that hasn’t been part of past scoring efforts.

According to Equifax documents, the new small business credit risk scores differ in four key ways from prior scoring systems:

The new approach uses several different automated scoring systems that are built on pre-recession, recession and post-recession data. They represent a new type of business scoring that provides a more complete view of how a company meets its credit obligations during changing economic conditions.

The new scoring system incorporates twice as many data attributes as other industry scores, including large and small business, public and private organization and time series variables.

A new minimum scoring standard and threshold will be used to validate the legitimacy of a small business and verify information supplied on the credit application errors, omissions or inconsistencies.

The new small business credit “scorecards” will be applied automatically based on business size. This is basically meant to encourage banks, lenders and other creditors to skip using other scoring systems and stick with this one alone.

This is not an experiment, trial or proposal. The new scoring methods are already in play. Specifically, Equifax is providing the following to lenders:

The Business Delinquency Score, which predicts the likelihood of severe delinquency on an account, and;

The Business Delinquency Financial Score, which determines the likelihood of severe delinquency on financial accounts.

A next-generation Business Failure Score, which incorporates many of the same data elements as the delinquency scores – enhancing its ability to predict the likelihood of business failure within the next 12 months.

And here’s something else business owners should know: Both of these new credit scoring products give lenders the additional choice of obtaining credit information on the business owner and other officers and principals, along with credit information on the business itself. Equifax says it plans to introduce other scoring changes and enhancements throughout the year.

The inability of banks and other lenders to anticipate how a small business might fare under changing economic conditions in the future has been a driving force behind the new scoring system. Burned by defaults in the “Great Recession,” creditors are seeking a new crystal ball to help them tag businesses that – although faring well now – might stumble if marketing conditions change.